Giant Batteries Disrupt Gas Power Plant Economics
Changing Economics
Giant batteries are reshaping the power industry by providing stable power supply and offsetting intermittent renewable sources. This is causing developers to abandon gas-fired generation projects worldwide.
Shifting Landscape
The long-term economics of gas-fired plants are rapidly changing, with some battery operators now offering competitive back-up power to grids, reducing the reliance on gas power plants.
Project Cancellations
The shift in economics has led to the cancellation of 68 gas power plant projects globally in the first half of the year, with developers opting for alternative energy solutions.
Impact on Gas Demand
This shift challenges assumptions about long-term gas demand and indicates a smaller role for gas in the energy transition than previously anticipated.
Financial Challenges
Developers are facing challenges in financing gas plant projects due to uncertainty over future revenues and the number of hours these plants would run.
Complex Modelling
Financial modelling for gas power plants is becoming more complex, as modellers need to anticipate peak demand and account for the variability of renewable sources.
Market Dynamics
Countries worldwide, especially in Europe, provide payments for standby power plants through capacity markets. Battery and interconnector operators are also participating and winning contracts.
Rise of Batteries
The cost of lithium-ion batteries has significantly decreased, making them a cost-effective alternative to gas power plants. This, coupled with the increasing share of renewable generation, is reshaping the energy landscape.
Rising Risks
Efforts to cut carbon emissions and the potential requirement for retrofitting fossil-fuel plants with carbon capture infrastructure add further challenges to the economics of gas power plants.
Future Disruptors
Other developments such as energy retailers offering incentives to reduce electricity usage and the widespread adoption of electric vehicles could further reduce the need for traditional back-up power plants.
As the energy transition progresses, the role of conventional generation is likely to diminish.
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